No one would forgo using a solicitor to buy a house. Granted – most people don’t have a choice in this as they will be using a mortgage and of course mortgage lenders require the use of solicitors to protect their interest. However even those who are putting only their own hard-earned cash into a residential property would rarely hesitate to employ a solicitor. And so it should be in respect of commercial property.
I have been wondering why tenants hesitate. Is it because they are taking out ‘only’ a five-year lease? But there are so many ramifications and implications in even a short lease that need to be explained – because they can have long-term consequences.
For example, many tenants do not realise that they can be liable for paying the rent and other lease costs after they have assigned the lease – if the tenant to whom they have assigned the lease defaults and the original tenant is written into an AGA (Authorised Guarantee Agreement). The worst-case scenario here: you outgrow your premises and want to move before the end of the lease term. You move to bigger, more expensive premises, the tenant you assigned the lease to defaults on the rent, insurance, or other costs, and the landlord comes after you for payment. Then you end up paying two lots of rent, one for a building you’re not even occupying. This is just one scenario of many, many scenarios that need to be explained carefully by a solicitor.
And when I say ‘solicitor’, I don’t mean just any solicitor …
The nightmare words to come from our clients’ mouths are always ‘I have a friend who’s a lawyer, so I think I will get him to have a look at it at first’.
Up selling in business is important and you can understand why people often get cold feet when listening to people’s referrals. However, as a commercial property surveyor I can tell you, hand on heart, that picking the right solicitor is essential and I would beg tenants to heed our advice.
I have seen, time and time again, the situation where a solicitor who has no experience in the property industry or with commercial leases is appointed as he’s a friend. They then throw a huge spanner into the works. Clauses that are accepted as standard are picked up on, frightening the tenant, and frustrating the landlord’s solicitor. In my experience, a lawyer without the correct experience will pull up matters in the legal proceedings that are of small relevance, they will argue points they do not understand the implication of, and – a potential dealbreaker – they will take far longer to go through the lease and associated documents such as the rent deposit and licence for alterations, than a well-practiced commercial property solicitor.
This is a potential nightmare for both us and – let’s face it – the lawyer who has found him or herself out of their depth through no fault of their own (other than wanting to take on work in a congested marketplace or doing a friend a favour). My impressions in these cases are that the lawyer is on the back foot, possibly not confident in dealing with the lease, less easy to ‘pin down’ from the point of view of obtaining updates, and can cause delays to a transaction that can lead to collapse. The agent often takes the flak with the delays as well so it is in everyone’s interest to appoint the right lawyer.
Here are my thoughts on picking your solicitor as a tenant. There are three very important things to consider.
1. Firstly, if you are a London tenant, pick a London-based commercial property solicitor – no one else: you want someone who transacts commercial leases in London on a regular basis
2. Secondly, understand how quickly you need your lease to be completed – if you are working to a strict deadline – either in terms of your own business needs or because the landlord has specified a certain completion date – speak to your agent and ask them who will get this lease done in a timely fashion. Then tell your solicitor to act with speed – they need to be instructed to act quickly. A good, experienced solicitor will be able to separate the rambling legal wording from the nitty-gritty, explain and query its essential elements and recognise what is standard. And what is standard can differ depending on locality, landlord, legal trends, or the nature of the lease.
3. Lastly, understand the costs and how much cover you need from a legal perspective. The bigger your move and the higher the value of your lease, the bigger firm you will need. For most moves below 10,000 square feet, though, you do not need a magic circle or even a major law firm. It may even be better to go to a mid-size law firm and get one of their top guys than go to a major firm and get a paralegal. Check out the website of the firm – often the bio of the solicitor or partner will mention where they have worked before – but obtain assurances that you will be dealing with your chosen solicitor.
Also, bear in mind that solicitors are strictly regulated in relation to giving or taking commission, so you can rest assured that when a surveyor is passing on a recommendation, we do it for the client’s interest and no one else’s – but in the knowledge that if the client follows our recommendation our lives may also be made that little bit easier.